A controversial Medicaid fraud amnesty program led by the state office charged with curbing government waste stands as a potential hurdle as New Jersey's comptroller vies for a state judgeship.

Two members of the Senate committee that vets and votes on judicial nominees say they have tough questions for New Jersey Comptroller Philip J. Degnan about last year's amnesty program, which recovered less than half of the taxpayer dollars it was supposed to because of discounts offered to participants.

The senators, a Democrat and a Republican, who serve on the chamber's judiciary committee, stopped short of saying they would not support Degnan, who was nominated for a seat on the Essex County Superior Court bench by the Murphy administration in September.

But their questions signal that the confirmation process for Degnan will be no rubber stamp.

Degnan oversees the office that extended a first-of-its-kind amnesty offer to Ocean County residents after sweeping welfare fraud arrests in the summer of 2017 in Lakewood. In that role, he also signed a letter threatening to take the Asbury Park Press to court to keep amnesty participant information confidential.

State Sen. Nellie Pou, D-Passaic, wants to know how reduced repayment deals could be made without Degnan's authorization, she said.

Degnan has said a rogue employee offered amnesty seekers discounted restitution, at a cost to taxpayers of $2.6 million. But in a lawsuit the employee asserts his supervisors — three of them — knew and one even signed off on the amnesty offer, officially called the Ocean County Recipient Voluntary Disclosure Program.

"I would think this is a matter of grave concern to all of us," Pou said. "And it should be. Anytime that you would get some question with regards to such an important, high-level position like that of the comptroller’s office, I would want to try and find out how could this possibly happen without (his) knowledge."

The amnesty offer allowed Ocean County residents to repay Medicaid benefits they received but weren't eligible for in exchange for the comptroller not seeking criminal prosecution. It was launched after 26 Lakewood residents were arrested on government assistance fraud charges in June and July 2017 as a way to combat a larger problem of fraud in Ocean County. Those 26 criminal cases are ongoing.

The three-month amnesty program recovered more than $2.2 million in Medicaid benefits, significantly more than in comparable criminal cases, the comptroller has said. But an exclusive report by the Press found that despite initial pledges to get back all benefits paid on behalf of individuals seeking amnesty, the state recouped less than half because discounted repayments were offered.

The Press also revealed the dispute about who within the comptroller's office knew about the discounts, a central dispute in the ongoing lawsuit.

Degnan said in a statement he was ready to field questions from the Senate Judiciary Committee members.

“It is certainly no surprise that the members of the judiciary committee will have questions regarding the Ocean County Recipient Voluntary Disclosure Program and other aspects of my career," he said. "I look forward to the opportunity to discuss my qualifications for a possible appointment to the Superior Court at the appropriate time.”

Both the program itself and the ongoing dispute are sticking points for Sens. Pou and Gerald Cardinale, R-Bergen.

Cardinale said the amnesty program was a "wrongheaded approach to the problem" of Medicaid fraud, adding the cases should have been prosecuted criminally.

"If he’s going to be a judge and he’s going to be soft on crime, I don’t want him as a judge," the senator said. "I would interpret his activity at this blush as being soft on crime."

Criminal prosecutions would serve as a deterrent to other fraudsters, Cardinale said.

"There are real concerns," he said. "I believe that when we mitigate the responsibility that people have, who have milked the program, we encourage others to milk the program. What I mean is, if these folks give back 50 percent of what they stole, it almost becomes attractive for someone else to say, 'Hey, why not steal. If we get away with it, we get away with it. If not, we get away with 50 percent.'"

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The state offered a Medicaid fraud amnesty program in late 2017 after a string of arrests in Lakewood. Here's key numbers to know about the program.
Stacey Barchenger, @sbarchenger

Pou, who has served as chair of the Legislature's Latino Caucus since 2006, also questions why the program was offered in the first place. She echoed concerns of local advocates and the national media that the amnesty program catered to Lakewood's majority Orthodox Jewish population.

"If this had happened in any other community I would wonder whether or not Gov. (Chris) Christie (and other state officials would have) ... made arrangements for this or agreed to this amnesty program," she said. "I’ve never heard of such a thing."

The amnesty program was offered amid a years-long, multi-agency investigation of government benefits fraud focused on the Orthodox Jewish residents of Lakewood.

Philip James Degnan, executive director of the State Commission of Investigation, is being nominated by Gov. Chris Christie as the next New Jersey state comptroller.(Photo11: State Commission of Investigation photo)

The Press' reporting on the program in October revealed a Lakewood Board of Education member, Moshe S. Newhouse, was granted amnesty and given a deal to repay just $24,000 of the $48,000 in benefits he received over three years. When the Press sought comment from the comptroller, Degnan sent a letter threatening to seek a court injunction to stop the media from publishing confidential information about benefits recipients — another thing drawing concern from one senator.

"It is very troubling that he tried to kill the story," Cardinale said. "I don’t believe his defense that he wanted to keep confidentiality of the individual names. That doesn’t wash.”

Degnan's interview before the 11-member Senate Judiciary Committee, an initial step in the confirmation process, has not yet been scheduled. If the committee approves the nomination it then goes before the full Senate for a vote.

Two of the senators representing Morris County, Degnan's home county, said they will not use the practice of senatorial courtesy to block Degnan's path to the bench. A third, Republican Sen. Anthony R. Bucco, did not respond to requests for comment.

"You have to look at his record in total," Democratic Sen. Richard J. Codey said of Degnan, adding that Degnan was well-respected in the legal community.

Republican Sen. Joseph Pennacchio said he wants Degnan to testify publicly before the committee so New Jerseyans will have answers about the amnesty program.

"Without me supporting him he won’t get his day before judiciary committee," Pennachio said. "Quite frankly that’s where all this should be vetted out.”

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Shimi (left) and Yocheved (behind) Nussbaum were arrested Monday in connection with a public-assistance fraud scheme. Their arrest was part of a larger operation, led by federal and state authorities, that netted the arrests of six others. Peter Ackerman

Shimi and Yocheved Nussbaum were arrested Monday in connection with a public-assistance fraud scheme. Their arrest was part of a larger operation, led by federal and state authorities, that netted the arrests of six others. Peter Ackerman

Shimi and Yocheved Nussbaum were arrested Monday in connection with a public-assistance fraud scheme. Their arrest was part of a larger operation, led by federal and state authorities, that netted the arrests of six others. Peter Ackerman

Law Enforcement try to make arrests at the home of Zalmen and Tzipporah Sorotzkin in Lakewood Township. Their arrest was part of a larger operation, led by federal and state authorities, that netted the arrests of six others. Peter Ackerman

Law Enforcement try to make arrests at the home of Zalmen and Tzipporah Sorotzkin in Lakewood Township. Their arrest was part of a larger operation, led by federal and state authorities, that netted the arrests of six others. Peter Ackerman

Law Enforcement try to make arrests at the home of Mordechai and Jocheved Breskin in Lakewood Township. Their arrest was part of a larger operation, led by federal and state authorities, that netted the arrests of six others. Peter Ackerman

Yocheved Nussbaum was arrested with her husband Shemi Monday in connection with a public-assistance fraud scheme. Their arrest was part of a larger operation, led by federal and state authorities, that netted the arrests of six others. Peter Ackerman